27 October 2021
Cryptocurrencies have been in existence for over a decade; they’ve become one of the most popular phrases in recent years worldwide. It has exploded in popularity as a growing number of investors flock to it, making it a favourite. Cryptocurrencies passed the $1.3 trillion barriers in early 2021, making them the best-performing asset class and the world’s fifth-most circulating currency in terms of value during the previous decade. According to experts, Bitcoin has been dubbed the “digital gold” of the digital age as it helps to boost the digital economy and usher in the fourth industrial revolution. Cryptocurrencies as an asset class had a +195 per cent growth in value between 2020 and 2021. This outperforms traditional commodities and financial markets like the S&P 500 Stock Index and the JSE Top 40 Stock Index. On the other hand, Gold saw year-over-year rises of no more than 25% during the same period.
In India, Cryptocurrency fever has spread beyond the cities to tier 2 and 3 towns. As of now, more than 1.5 crore Indians own Cryptocurrencies valued at more than Rs 1,500 crore. If you’re considering investing in Cryptocurrencies, you must avoid the myths and disinformation that surround the subject. However, everything comes at a cost. The path of this-age currency has not been easy as it appears. It has been tarnished by a slew of myths, rumours, and misunderstandings, with many people dismissing it as a speculative transaction and environmental disaster. While not all of them are completely incorrect, a little understanding does not go a long way and often leads to confusion.
So, to clear things out, here are 10 facts that debunk some popular Cryptocurrency Myths:
Myth 1- Cryptocurrencies Are Prohibited:
This is something you might hear once in a while in a conversation regarding Cryptocurrencies and Bitcoins. The claim that Cryptocurrencies are illegal money isn’t accurate, but it’s also not entirely false even. Algeria, Bolivia, Ecuador, Russia, Trinidad, and Tobago have all banned Cryptocurrency. On the other hand, the United States, the European Union (EU), and the Group of Seven (G7) countries have made Cryptocurrencies legal tender. Former Indian Finance Minister Arun Jaitley stated in his 2018-19 budget that Blockchain Technology will be investigated to promote and secure safe digital transactions. India has not yet issued an official ban on Cryptocurrency transactions. However, in India, Cryptocurrencies are thriving.
Also Read: Safe Tips For Smart Crypto Investing
Myth 2- It’s Completely Anonymous:
When people are learning about Cryptocurrencies for the first time, they frequently misinterpret the level of anonymity it offers. Because the concept of “pseudonymity” is unfamiliar to most people, it obscures rather than clarifies the capabilities of Cryptography. Cryptocurrencies aren’t the same as traditional currency. Bitcoin, the mother of all Cryptocurrencies, is pseudonymous rather than anonymous; it does not reveal the user’s data during the transaction. Notwithstanding, regular people can track identities across the Blockchain and there are sophisticated instruments that provide Blockchain forensics for illegal activities to various governmental and financial institutions.
Other coins offer significantly more anonymity; Monero and Dash, for example, are centred on anonymity. Nevertheless, using Crypto on specific exchanges typically necessitates the submission of personal information, and many assist governments in the detection of fraudulent conduct.
Myth 3- Only One Blockchain Exists:
The fact that each Cryptocurrency has its Blockchain but it's not the only one. Because each Cryptocurrency is written uniquely, it has its Blockchain, which records transactions by adding a new “Block” of data to the “chain”. The time it takes to do so varies by Blockchain; Bitcoin’s Blockchain takes 10 minutes to complete while Ethereum’s takes 10-15 seconds. Blockchains, on the other hand, differ in type depending on their intended purpose and industry; some are public while others are private and they can be open-source or closed-source. Bitcoin, for example, aspires to be digital cash but Ethereum enables developers to create peer-to-peer applications that don’t rely on intermediaries and run on its Blockchain. Their applications are vastly dissimilar. As a result, you won’t be able to conduct a Bitcoin transaction on the Ethereum Blockchain because the two Blockchains don’t connect. It’d be like trying to pay for a meal in the United States using rands from South Africa. To pay, the restaurateur would want you to convert your currency into US dollars.
Myth 4- Too Risky:
There’s no denying that trading Cryptocurrencies is risky but that’s part of the appeal and why so many people have chosen to do so. However, it's not correct to say that it is overly dangerous. There are risks in trading Cryptocurrencies, just as there are in trading any asset, but there are also things you can do to mitigate them, your risk management strategy remains the same whether you trade forex or Cryptocurrencies. You’ll still use stop losses and maintain a risk-to-reward ratio; the only difference is that the price will most likely fluctuate a lot more, making it appear riskier than it is.
Also Read: Is Investing In Crypto Right For You?
Myth 5- Should Be Owning A WHOLE Coin:
You may believe that Bitcoin is prohibitively expensive and that you cannot afford to purchase even a single unit. We, like humans, enjoy having complete control over our possessions. We want to live in our own home, drive our car, and eat a full plate of food. When we want to share something with others we feel embarrassed. That is precisely why many of us believe we should also have one Bitcoin or ten or perhaps one hundred? We double-check the cost, whether ten thousand dollars is equivalent to 0.1 Bitcoin. The prices rise to $20,000. You can afford to purchase 0.05. it makes no difference if you are holding all coins, to become wealthy in the future you do not need to own even one Bitcoin even if your current budget just permits you to trade 0.01, 0.001. or 0.0001 Bitcoins, it’s still a fantastic investment.
With “cheap coins” you could potentially get caught. You analyze the costs of various tokens and purchase the ones that are the least expensive. That way, instead of owning a millionth of the expensive coin, you hold a million tokens of the cheap coin. However, keep in mind that just because you have a million dollars in your pocket does not mean you are a millionaire. It’s extremely unlikely (but not impossible) that a coin you bought for one cent today will be worth ten dollars in the future. That wild 1000x more investment from others, which in turn resulted in 1000x more faith in the project. And only a small percentage of coins receive that kind of investment and care.
Myth 6- It’s Not Regulated:
Cryptocurrency regulation is a hot topic right now; different countries have different levels and types of regulation. Europe is intrigued by Cryptocurrency, with Malta standing out by being at the forefront of the change and other countries have more mild laws. The United States, Australia, Japan, South Korea, and most South American countries – in fact, the majority of countries in the globe -have all agreed to allow Cryptocurrencies, but with varying levels of compliance. Cryptocurrency has been effectively prohibited in China, Macedonia, Morocco, Algeria, Pakistan, Bangladesh, Nepal, and India. However, don’t be shocked if you witness Crypto activity from these countries as well. VPNs are quite effective, and you can’t control how math and code are used on your computer. For the most part, however, the underlying conclusion is that greater regulation will almost certainly be implemented shortly.
Myth 7- Indian Currency Can Be Replaced:
Well… this information is incorrect. The Reserve Bank of India issues Indian money which is backed by a sovereign guarantee. On the other hand, Cryptocurrency is not issued by any bank. While it is gaining popularity among investors, it will never be able to replace the rupee.
Myth 8- Exchanges Are A Safe Place To Put Your Money:
When you store your Cryptocurrencies on exchanges you run the risk of losing them. To begin with, you are most likely not the genuine owner of your coins. Exchanges have their wallets which they use to store your Cryptos. When markets fail, exchanges will likely crash as well. This is primarily due to an increased volume of inquiries on their websites. They may even block off access to users on purpose to prevent money from leaving their platform. Finally, hackers enjoy exchanging information. For them, it's like a honey pot. In the past, there have been dozens of attacks and hacks, and there will be more in the future. It is not suggested to store your funds with them unless you are actively trading your coins or do not stake your coins on exchanges. Consider acquiring hardware or a cold wallet.
Myth 9- Only The Big Ones Are Traded:
Many people only consider the major Cryptocurrencies, such as Bitcoin and Ethereum, when they think of Cryptos trading. There are many more than you can trade in reality. The different brokers or exchanges provide hundreds of different pairs. Being able to trade a wide range of assets rather than simply the main ones opens up a world of possibilities and profit chances. So, if you’re thinking about trading a coin it's almost certainly available as a tradable asset on a broker platform or possibly an exchange. You can find it if you want to trade it.
Myth 10- Scams Are Common With Crypto:
Another common misconception about Crypto is that it is vulnerable to fraud and attracts a large number of hackers. It’s important to remember that traditional banking systems are not immune to fraud and money laundering. Nonetheless, tech-savvy and cautious investors conduct extensive research and exercise caution while purchasing digital assets and securing their Crypto wallets.
In India, Cryptocurrencies are primarily unexpected territory. The lack of knowledge and confusing rules make it difficult for investors to decide whether or not to invest in Bitcoins. Before you buy Bitcoin or any other Cryptocurrency, thoroughly consider the advantages and disadvantages of keeping them, their use, and the tax implication they entail.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.